Banks or financial institutions offer many types of loans, including personal loans, home loans, education loans and more. But sometimes, you may get confused about the terms and hidden charges of these loans. That’s where a Key Fact Statement (KFS) becomes important. It helps you understand the important details of your loan in a clear format. Whether you are applying for the loan online or offline, this document will provide you with full transparency. Let’s learn in detail about the Key Fact Statement’s importance and how understanding it can help you in the long run.
What is a Key Fact Statement?
A Key Fact Statement is a short document that has all the details of the loan, including loan amount, interest charges, repayment tenure and and terms of the loan. It also includes information like processing fees, EMI, repayment schedule and any penalties.
With a KFS, the aim is to provide borrowers with all important facts in one place before they sign the loan agreement. In simple words, it is just a summary of your loan.
Importance of a Key Fact Statement
Here are a few reasons why the KFS is important for borrowers:
- Transparency: It shows the total cost of the loan clearly.
- Easy Comparison: You can compare different loan offers easily because all lenders follow the same format.
- Budget decision: When you know the exact EMI and fees, you can decide if the loan fits your budget.
- Avoid Hidden Charges: Often, people complain about extra charges they did not know about. KFS protects you from such situations.
- Legal Proof: It serves as proof of the loan and agreement between you and the lender.
What is Included in a Key Fact Statement?
Here are the major inclusions of a Key Fact Statement:
- Loan Amount
- Interest Rate (fixed or floating)
- Monthly EMI Amount
- Loan Tenure
- Processing Fee & Other Charges
- Prepayment and Foreclosure Charges
- Late Payment Penalties
- Contact Information
Key Updates to the KFS Guidelines by RBI
The Reserve Bank of India (RBI) has made several updates to the Key Fact Statement guidelines to make loans more transparent. Here are some of the major updates:
- Standard Format: All lenders must use a standard KFS format.
- Before Signing: KFS must be given to the borrower before signing the agreement.
- Language Choice: KFS must be available in local Indian languages for better understanding.
- Review Period: Borrowers must be given a review period before signing the KFS. This is 3 days for loans of 7 days or more and 1 day for loans less than 7 days.
- Digital or Physical: It can be shared in either printed form or digitally via email/SMS.
Understanding Loan Terms Through a Key Fact Statement
The biggest benefit of the KFS is that it helps you learn loan terms easily. Here’s an example for better understanding:
Suppose you are applying for a ₹1 lakh personal loan at a 12% per annum interest rate with CASHe. Now, with the KFS provided, you would get to know the following details:
- ₹1 lakh is the loan amount
- 12% per annum is the interest rate
- Now, if you are taking the loan for 2 years, then its EMI will be ₹4,707 per month.
- You also get to know about the processing fee and other penalty charges.
With this, you can easily calculate whether you can afford the loan and if the interest rate is fair.
Validity of a Key Fact Statement
Once a lender provides you with a KFS, it remains valid for 3 days, provided the loan is for more than 7 days. However, for loans less than 7 days, the validity of KFS is 1 day. This is the time period provided to review the details of the loan. During this time, the terms mentioned in the document (like interest rate and charges) cannot be changed.
How to Access Key Fact Statements?
Here are some simple ways to access the Key Fact Statement:
- Most lenders provide the KFS just before you sign the loan agreement.
- If you are applying for the loan online, the KFS would be sent to your registered email or phone.
- Some lenders allow you to download your KFS through your bank account dashboard or app.
- You can also visit the branch and request a printed copy of KFS.
Conclusion
A Key Fact Statement is a very important document and every borrower must read and understand it before availing the loan. Whether you are taking the loan for personal or business needs, ensure you always review the loan details with the KFS.
Now, if you need quick funds for your financial requirements or an emergency, download the CASHe app. CASHe offers instant personal loans of up to ₹3 lakh at competitive interest rates. Apply online on the app and get the loan approved in minutes.
